So it's no wonder that the hotel blogs are aflutter with news that the hotel industry may have turned the corner, thanks to news out from Smith Travel that HIL is up.
Here's what has everyone talking.
What exactly is this HIL they're talking about? The 9 components are:
* Hours worked in hotel industry
* Hotel profit margins
* U.S. travel plans index
* International tourism demand for visiting the U.S.
* National employment conditions
* Oil prices
* Financial market conditions
* Incoming orders for high-ticket items
* Housing market conditions
But while everyone is happy that the HIL indicators are mostly up, let's take a closer look.
Profit margins up. That's good. US travel plans index up. Good. Tourism demand for visiting US up. Good good good. Employment conditions up? Say what?
Okay, they're already losing me on that one.
But Meanwhile Closer to Home
Yep, the same folks are telling us that for last week ADR is down, occupancy is down. In fact, they tell us that
The U.S. hotel industry posted declines in all three key performance measurements during the week of 22-28 November 2009
Is it just me or does it seem a bit bizarre that we supposedly rounded a bend back in October but ADR and occupancy continue to slide through November? What kind of bend is that?
So what happened to all those travel plans that were looking so good back in October?
Hmmm.
Last week, I might remind you, included Thanksgiving. So declining numbers all around during the big holiday week, with continuing erosion of ADR.
ADR is going to be the toughest aspect for the entire industry going forward. Now that it's down - and still sliding, it seems - getting those rates back up to profitable levels is not going to be easy.
But back to that October HIL. What about those other 3 indicators. What's up with them?
Three of the nine components had a negative or zero contribution to the HIL in October: weekly hours worked in hotels, oil prices and housing activity
So the indicator for hours worked? Down. Fewer employee hours at hotels.
Profits up though. Slightly. After months of decline, that sounds good.
But if the hotels are profitable because of layoffs and reduced hours, is that sustainable? Is quality of service reduced? Are employees stretched to the limit? That can't last long. Reducing staff hours is a temporary cure and every GM out there knows it.
And oh yeah, that pesky old housing thing. That's no big deal right? After all, luxury occupancy was up last week. Thanksgiving week.
And speaking of the luxury market, there's this.
Ouch.
While foreclosures are up and hotels are failing right and left, I think it's a bit early to say we've rounded any corners. Sure, whenever there's a foreclosure, it's going to force the occupancy up for the competitors. There's always that silver lining, I suppose.
And for folks out shopping for an inn who have cash and lots of it, well, the bargains are out there. Real bargains. Funding available for those without oodles of cash? Not so much.
So really, to think that just because October HIL was looking up that folks are ready to say that we've rounded a corner?
Staying afloat has never been more challenging. GMs know that. Owner/innkeepers at small inns know it, too. If there's a corner that's easy to round these days, it's only consultants seeing it. At the ground level, things just aren't looking all that rosy.
At the end of all this, there will be fewer players left standing. In the B&B industry, far fewer B&Bs will be around in 2 years than are around now. You can put money on that.
For those who survive, there will be light at the end of the tunnel but still a long hard slog to ever get ADR back to where it was last year.
Out of the woods? Rounding a corner?
Sorry but no, I don't think so.
But wishful thinking does have its own attraction all the same.
